A Customer-Oriented Approach to Reduce the Complexity of Business ...

The 8th International Conference on Concurrent Enterprising. Rome, Italy, 17-19 June 2002

A Customer-Oriented Approach to Reduce the Complexity of Business Process Integration Boris Otto1, Helmut Beckmann1 1

Fraunhofer-Institute for Industrial Engineering IAO, Nobelstr. 12, 70569 Stuttgart, Germany {boris.otto, helmut.beckmann}@iao.fhg.de

Abstract One of the main objectives of electronic business is the facilitation of inter-company process integration. However, in recent years many efforts in this field did not live up to expectations. Reasons for that can be found in the enormous complexity of the integration task. The paper proposes an approach to overcome current obstacles by providing a set of business process components and a standardised document exchange format while taking into account the specific requirements of customeroriented suppliers of the German electrical industry. The approach is embedded in a three-step implementation procedure. The paper closes with the presentation of the findings in a case-based scenario taken from the electrical power-tool industry. Keywords Inter-company process integration, business process components, electronic business, electrical industry

1 Introduction Electronic business solutions aim to improve inter-company business processes between organisations and their suppliers and customers by exchanging information in a machinereadable way [Mertens 2000]. During the last years, especially XML based applications promised to vanquish the problems of former EDI efforts due to the ubiquity and low-priced availability of communication networks such as the Internet [Picot, Reichwald, Wigand, 2001]. However, the inherent complexity of business process integration hinders the successful realisation of many efforts in this field [TechConsult 2001]. The paper introduces an approach to reduce those difficulties while taking into account the specific requirements of customer-oriented suppliers from the German electrical industry. The presentation of the “as is” situation focuses on the field of research both from an industry-wide perspective and an individual case point of view. After the identification of current shortcomings, the paper introduces a procedure to analyse, design and implement inter-company business processes. To exemplarily demonstrate the findings, the paper closes with a case-based scenario taken from the German electrical power-tool industry.

2 Current Situation of Business Process Integration The following is to give an overview of the current situation of business process integration in the German electrical industry. The industry is partly characterised by a dominant position of supplying companies which can be divided into wholesalers and manufacturers on the one side and a large number of small and medium-sized retailers and customers on the other side.

2.1

Industry-Wide Situation

In general, supplying companies use electronic business applications in order to reduce the costs of the sales process (Hinderer, Kirchhof, 2002). But the current situation is considered not

The 8th International Conference on Concurrent Enterprising. Rome, Italy, 17-19 June 2002

satisfying as the main results of a market survey among 296 companies show [Otto, Beckmann, Müller, 2002]: •

Nine out of ten respondents think that their business processes should be improved.

•

Fifty per cent of business processes refer to the exchange of redundant information.

•

Three out of four respondents consider the number of manual activities as “high”.

•

Two thirds of the respondents agree that the information technology used for electronic business purposes is very complex.

•

Also two thirds of the respondents say they often receive external requests for the participation in an integrated electronic business system (e.g. electronic marketplaces).

The results show that the situation in the German electrical industry is unsatisfactory when it comes to business process integration. Moreover, current initiatives that provide document exchange formats and business process frameworks in order to facilitate the tasks are not accepted by the user community. An average of only 6.6 per cent of the respondents stated that they are acquainted with initiatives such as BizTalk, ebXML, and eCo. Two out of five companies use EDIFACT as a document standard whereas XML based formats such as openTRANS, xCBL and cXML are only used to an inconsiderable extent. The group of EDIFACT users, though, is dominated by major companies, which corresponds to the fact that small and medium-sized enterprises do not have adequate resources and technologies to utilise EDI applications [Stefansson 2002]. To sum it up, electronic business standards have not reached yet the German electrical industry or are not applicable for this industry. Based on these findings the following paragraph analyses the reasons for this shortcomings by examination of the sales process of nine individual cases.

2.2

Reasons for the Complexity of Business Process Integration

The entire sales organisation of companies can be divided into the organisational structure and the sales process. The sales process itself consists of four phases [Bauer 2000; Stender, The, Rack, 2000]: •

Pre-sales

•

Sales

•

Order processing

• After-sales The pre-sales phase is dominated by market surveys and customer segmentation whereas during the sales phase price checks are performed and product consulting takes place. After products are sold the order must be processed before the product may be assembled on the customer’s site during the after-sales phase. In order to gain insight into the problems of small and medium-sized customers concerning the optimisation of inter-company sales processes, nine detailed process analysis workshops were conducted with the project partners of the E-START project [E-START 2002]. The focus was put on the sales phase and the order processing phase since these two phases possess a high rationalisation potential due to the high portion of repetitive activities. The results of the process analysis workshops show that the reasons for the complexity of business process integration are twofold [Otto, Beckmann, 2002]. First, a variety of different information systems and business applications is involved. In the majority of the cases a certain information system represents a certain sales channel, e.g. a shop system or an electronic marketplace. Moreover, these different systems usually have different interface formats and use different communication protocols. Second, a variation of the standard processes is often caused by the relevance certain customers have for the supplying company. A small customer may follow a standard process but a key account might demand a completely different process. So,

The 8th International Conference on Concurrent Enterprising. Rome, Italy, 17-19 June 2002

the level of complexity depends on two variables, i.e. complexity in terms of system integration – represented by the number of different interface formats a company has to support – and complexity in terms of business process variants deriving from various needs of business partners. In order to reduce the overall complexity of the integration task, three strategies can be identified: •

Reduction of the number of interface formats

•

Reduction of the number of business process variants

• Combined reduction of both variables These findings in combination with the analysis of the overall situation within the industry form the foundation of the approach to reduce the complexity of business process integration presented in the following section.

3 An Approach for Reducing Process Integration Complexity The approach consists of three phases, namely a business process analysis phase, a design phase and an implementation phase. The three phases have been developed to suit the special requirements of companies from the German electrical industry.

3.1

Phase 1 – Process Analysis

The main objectives of the business process analysis are to identify process variants, to analyse the information systems deployed to support the process and to gain insight into the customer segmentation [Hohmann 1999]. The analysis itself comprises seven different steps that are conducted either by the process analyser (PA), the interviewed person (IP) or by both of them (cf. Table 1). Step

Description

Participants

1 2

Schedule meeting to conduct interview Identify significant process variants

PA, IP PA, IP

3 4

Jointly fill in Analysis Form Merge different forms into Process Book

PA, IP PA

5 6

Review Process Book Finalise Process Book

IP PA

7

Accept Process Book

PA, IP

Table 1: Steps of the E-START Process Analysis

The process analysis phase uses two documents, namely the Analysis Form and the Process Book. The Analysis Form is to identify and describe single variants of the sales process whereas the Process Book contains a combined view of all process variants. The Analysis Form accommodates the fact that the clientele within the electrical industry is likely to handle a variety of different process variants for reasons mentioned above. In contrast to that, the Process Book guarantees that the sales process is viewed as a whole and optimised as a whole in the following phases.

3.2

Phase 2 – Process Design

The Process Book forms the foundation for the Process Design phase because the “to be” processes are not designed from scratch but rather need to be synchronised with the existing system landscape. The Process Design phase takes into account both degrees of freedom as identified above. The number of process variants must still reflect the level of customer orientation that the company

The 8th International Conference on Concurrent Enterprising. Rome, Italy, 17-19 June 2002

wants to realise but on the other hand should leverage the benefits of standardised business process components. This goal can be achieved by considering the fact that, in general, intercompany business processes can be classified according to three different levels of detail (cf. Figure 1): •

Business process itself

•

Process components as parts of the entire business process

• Activities as parts of process components The process components can be divided into three different groups, namely “Core Processes”, “Support Processes”, and “Admin Processes” [Scheer 2000]. Business Process

Process Component

Activity

Core Processes

Support Processes

Admin Processes

Figure 1: Business Process Categorisation

The process components form the central tool for modelling inter-company sales processes. Every component represents a clearly defined business impact but is flexible enough to allow different business process variants by linking several process components into an entire business process. Core Processes are those that represent a vital business functionality (e.g. “Create RFQ (Request for Quotation”) and “Create Order”) while Support Processes mainly are designed for business functionality that is not critical for achieving the business goal (e.g. “Order Status Check”). Admin Processes (e.g. “Login”) enable the business process from a technical perspective but are not closely related to the business functionality (cf. Table 2). Core Processes

Support Processes

Admin Processes

K01

Create RFQ

U01

Transmit Document

A01

Login

K02

RFQ Splitting

U02

Check Status

A02

Clearing

K03

Join Quotations

U03

Check Availability

K04

Create Ackn’t

K05

Create Order

K06

Fill Shopping Basket Table 2: Process Components

Besides using process components to design a business process that matches requirements of customer orientation, a standardised document exchange format should be used in order to minimise the differences of system interfaces. This combination allows to configure a central middleware not only with an interface format but also with predefined process components. The current approach uses openTRANS as a common format for all interfaces between the central sales application of a large manufacturer and its customers. openTRANS is a transaction standard based on the XML specification [Bray, Paoli, Sperberg-McQueen, Maler, 2001] that

The 8th International Conference on Concurrent Enterprising. Rome, Italy, 17-19 June 2002

defines different documents that are vital for an inter-company business process. Among those documents are [Kelkar, Otto, 2001]: •

openTRANS ORDER

•

openTRANS ORDERCHANGE

•

openTRANS ORDERRESPONSE

•

openTRANS RFQ

•

openTRANS QUOTATION

•

openTRANS INVOICE

• openTRANS RECEIPTACKNOWLEDGEMENT The usage of openTRANS has several advantages. First, it is no proprietary solution but rather a neutral standardisation initiative developed by two German research institutes with consideration of German market needs. Moreover, thanks to the characteristics of XML a business document is both processable by automated information systems and readable by human beings. This advantage can be leveraged so that the same openTRANS ORDERRESPONSE can be sent from a manufacturer to a key account customer via an HTTPS connection and can be displayed in a standard Web browser using Extensible Stylesheet Language Transformations (XSLT) [Clark 2002].

3.3

Phase 3 – Implementation

After Phase 2, which led to designed business processes using process components, is concluded the implementation can be started. In the majority of the cases the implementation requires the integration of existing information systems supporting internal processes and new systems that function as a link between the internal systems of a manufacturer and the customers’ system landscape. So-called middleware applications can be used to integrate different types of information systems. Middleware applications can be divided into message-oriented applications and interface-oriented applications [Linthicum 2001]. While the latter do not exchange documents that carry the business information but rather invoke business functionality from a remote server, message-oriented applications are suited best in order to allow the exchange of openTRANS messages. Moreover, message -oriented middleware usually offers a graphical user interface that allows the pre-configuration of certain process components.

4 Case-Based Scenario In order to give a detailed insight into the application of the approach, the paper discusses the case of one of the world-leading manufacturers of power-tools. The product range covers various sorts of handheld tools such as electrical saws, sanders, planers, and drills. The industry is characterised by a limited number of manufacturers, a large number of customers with various buying processes, and few specialised electronic marketplaces [Otto, Seifert, 2002]. The Process Analysis phase provided the following results: The sales structure is organised in a traditional way in different divisions and sales organisations in every country the company is present on the market [Bonart 1999]. A group-wide ERP system is in place that forms the central application for the order management. No other information system is used for order handling and management. Customers can be divided into three different segments: • •

Small dealers and end customers that order products more or less frequently with or without support of a product catalogue. Small and medium-sized dealers that order frequently.

•

Major dealers that order very frequently and in large lot sizes.

The 8th International Conference on Concurrent Enterprising. Rome, Italy, 17-19 June 2002

Customers of the first segment use various ways to send orders to the manufacturer. They order by phone which includes a real-time availability check since the sales person can directly respond to any inquiries. Besides, mail orders and fax orders are the preferred alternatives. The order processing for the second customer segment mainly is based on fax transmission. In contrast to the first segment dealers have very sound knowledge about the requested product and material number systems so that neither product catalogues nor consulting is necessary. The third customer segment is characterised by fax orders for large lot sizes. Those orders are generated and transferred automatically by the customer’s material management application. In order to provide each customer segment with a specific order management process, it was decided to reduce the complexity of the business process integration by reducing the number of interface formats rather than minimise the number of business process variants. To achieve a maximum degree of customer satisfaction, three different process scenarios have been designed (cf. Figure 2).

1 Buyer (Electronic Marketplace)

2 Supplier (ERP System)

Buyer (Web Order System)

3

Supplier (ERP System)

Buyer (ERP System)

A01

A01

A01

K06

UL

K05

U03 K05

U03 K05

U01

U01 U03

U01 K04

K04

U01 U03

Supplier (ERP System)

U01 U03

Figure 2: Process Scenarios

The first scenario focuses on a synchronous message exchange between a human being and the manufacturer’s ERP system. The sales process consists of five process components, i.e. “Login”, “Fill Shopping Basket”, “Check Availability”, “Order”, and “Check Status”. The scenario also includes co-operation with an electronic marketplace in the power-tool industry. The marketplace provides a user front-end for product search and order submission. A second scenario assumes that the customer – a frequently buying dealer – does not need any product catalogue functionality because all relevant product information – including material numbers, delivery times etc. – is available at the dealer’s site. This may be the case when the buying person knows which numbers to enter or the dealer uses the upload functionality to process a structured file that can be exported from own information systems. To realise this scenario, the following process components are used: “Login”, “Upload File (UL)”, “Check Availability”, “Order”, and “Check Status”. The upload (UL) component was integrated although it is not part of the model but because it is necessary to provide customers that are able to export orders from own information systems with a functionality to process the exported data. To match different systems requirements in the industry three different upload formats are specified (CSV, simple XML, and MS-Excel based). Moreover, a web order system (cf. Figure 3) was developed that allows the user to enter order data manually. The web order system offers similar functionality as a shop system but does not provide a catalogue management system. And

The 8th International Conference on Concurrent Enterprising. Rome, Italy, 17-19 June 2002

apart from that, it is equipped with an interface to import order formats such as simple Comma Separated Values (CSV) files and spreadsheet data. The third scenario is the most simple one from a process complexity point of view. It is assumed that a direct connection between large dealers and the manufacturer is established. The scenario supposes an information system at the dealer’s site that can be configured to send standardized XML messages. The user at the buyer’s site just creates a purchase order in the ERP system. The order is then sent automatically to the supplier via output determination. It is checked within the supplier’s ERP system after receipt through the related process component triggered in the middleware. However, no further information needs to be exchanged because long-term contracts and pricing conditions are in effect that define all necessary details for the business relationship.

Figure 3: Web Order System

To sum it up, the complexity of the integration tasks of the particular case from the power-tool industry has been reduced by means of two concepts: •

Re-use of flexible process components for different sales order management processes

• Use of a single middleware gateway in front of the manufacturer’s ERP system The implementation strategy developed to optimise the inter-company sales process favours a step-by-step approach rather than a “big bang” strategy. At present, scenario 1 is in productive use, scenario 2 is just before “go live” whereas scenario 3 is scheduled to be implemented after that.

5 Conclusion Considering problems and shortcomings of current approaches to cope with the complexity of inter-company business process integration, the paper introduces a model of flexible process components that can be deployed in multiple use cases. The approach provides a solution to the

The 8th International Conference on Concurrent Enterprising. Rome, Italy, 17-19 June 2002

problem of mastering the complexity and the number of different variants of business processes while simultaneously reducing the effort of the overall integration task. The advantages of the proposed approach are twofold. First, the approach refers to flexible process components that can be pre-configured in software tools and to a standardised document exchange format. The use of such standardised components leads to a reduction of investment risk and reduced project times. Second, the set of process components helps to integrate both the business and the implementation perspective on business process integration because the components are readable by human beings and by information systems likewise. Both advantages have a positive impact on the project duration and the budget of process integration efforts. Acknowledgement This work has been partly funded by the German Federal Ministry of Economics and Technology (BMWi) through the E-START project. The authors wish to acknowledge the Federal Ministry for its support. We also wish to express our gratitude and appreciation to all the E-START project partners for their contribution during the development of various ideas and concepts presented in this paper. References Bauer, Rudolf A.: Vertriebsorganisation. Kundenorientierung durch effektive Strukturen. In: Reichwald, Ralf; Bullinger, Hans-Jörg (Eds): Vertriebsmanagement: Organisation – Technologieeinsatz – Personal. SchaefferPöschel, Stuttgart, 2000, p. 35-83. Bonart, Thomas: Industrieller Vertrieb. Gabler, Wiesbaden, 1999. Bray, Tim; Paoli, Jean; Sperberg-McQueen, C.M.; Maler, Eve: Extensible Markup Language (XML) 1.0 (Second Edition). WWW page. http://www.w3.org/TR/2000/REC-xml-20001006, accessed 07.04.2001. Clark, James: XSL Transformations (XSLT). WWW page. http://www.w3.org/TR/xslt, accessed 18.01.2002. E-START: E-Commerce-Standards und -Systemlösungen für zwischenbetriebliche Geschäftstransaktionen in mittelständischen Unternehmen. WWW page. http://www.e-start.iao.fhg.de, accessed 06.04.2002. Hinderer, Henning; Kirchhof, Anja: Trendanalyse Elektronische Marktplätze/Bullinger, Hans-Jörg; Ott, Sören (Eds). IRB-Verlag, Stuttgart, 2002. Hohmann, Peter: Geschäftsprozesse und integrierte Anwendungssysteme: Prozessorientierung als Erfolgskonzept. Fortis -Verlag FH, Köln, 1999. Kelkar, Oliver; Otto, Boris: Spezifikation openTRANS. Version V1.0. WWW page. http://www.opentrans.org/ dokumentation.php?file=openTRANS-V1.0.pdf, accessed 20.12.2001. Linthicum, David S.: B2B Application Integration. E-Business – Enable Your Enterprise. Addison-Wesley, Boston, 2001. Mertens, Peter: Integrierte Informationsverarbeitung. Vol. 1: Administrations- und Dispositionssysteme in der Industrie. Gabler, Wiesbaden, 2000. Otto, Boris; Beckmann, Helmut: E-START Projektbericht für das Arbeitspaket 2 (PB-02-2001), 2002. Otto, Boris; Beckmann, Helmut; Müller, Sylvia: E-Business-Standards in der deutschen Elektroindustrie/Bullinger, Hans-Jörg; Ott, Sören (Eds). IRB-Verlag, Stuttgart, 2002 (in press). Otto, Boris; Seifert, Silke: Effiziente Bestellabwicklung. Beschaffung Aktuell No. 1, 2002, p. 42-45. Picot, Arnold; Reichwald, Ralf; Wigand, Rolf T.: Die grenzenlose Unternehmung. Information, Organisation und Management. Gabler, Wiesbaden, 2001. Scheer, August-Wilhelm: ARIS – Business Process Modeling. Springer, Berlin, 2000. Stefansson, Gunnar: Business-to-business data sharing: A source for integration of supply chains. International Journal of Production Economics, Vol. 75, 2002, p. 135-146. Stender, Michael; The, Tek-Seng; Rack, Hans-Peter: Einsatz von IT im Vertrieb. Von Computer Aided Selling bis Internet. In: Reichwald, Ralf; Bullinger, Hans-Jörg (Eds): Vertriebsmanagement: Organisation – Technoloieeinsatz – Personal. Schaeffer-Pöschel, Stuttgart, 2000, p. 87-128. TechConsult GmbH: Internet- und E-Business-Einsatz im bundesdeutschen Mittelstand. Eine Untersuchung der TechConsult GmbH im Auftrag der Zeitschrift Impulse und IBM. WWW page. http://www5.ibm.com/de/mittelstand/download/bericht_ebusiness2001.pdf; accessed 05.12.2001.